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Industrial Electrical Equipment Outlook 2009
The large price tags associated with power generation and control systems makes it easy to understand why short term earnings and profitability maybe in question for the industrial equipment industry.
In this article we'll review the key players in the industry to find those that have positioned themselves for a brighter future beyond 2009.
ABB Limited (NYSE:ABB)
Generating power is one thing, but when agricultural producers in the Netherlands and the U.K. wanted to ensure that electricity for two super-sized greenhouses in their respective countries would be managed efficiently they each turned to ABB medium voltage products. ABB's UniGear power supply will provide power to the greenhouses and supply electrical power that can be resold to local power grids. ABB's products support infrastructure development in the areas of renewable energy, power management equipment, robotics used by automotive manufactures and other automation products. Given the headwinds in the global economy, ABB reported a 29% decline in large orders above $15 million for the third quarter ending September 30 in comparison to the same time period a year ago. The decline in large orders was partially offset by a 14% increase in small orders below $15 million led by orders from the U.S. and Asia. Despite the shift from large to small orders, ABB's revenue increased 22% over the third quarter a year ago to $8.8 billion. ABB's future success will be determined by the priority given by developed nations to upgrade and also by developing nations desire to expand their power transmission systems beyond 2009.
Eaton (NYSE:ETN)
Eaton is a supplier of electrical systems used around the world and also fluid power systems used by the aerospace aircraft industry and automotive transmissions and fuel management systems used by the trucking and auto industries. Eaton reported record third-quarter revenue of $4.1 billion representing a 25% increase over the prior year driven primarily by acquisitions. Eaton completed 11 acquisitions last year focused on boosting its Electrical and Fluid Systems business segments. Fourth-quarter results are not expected to be as strong given the slowdown in the global economy, but Eaton's commitment to focusing on high growth Electrical and Fluid power industries may pay dividends in the years following 2009. (For more on this method of corporate growth, be sure to check out our Mergers And Acquisitions Tutorial.)
Parker-Hannifin (NYSE:PH)
Parker-Hannifin is more of a pure play on motion-control and fluid systems used in all types of industrial and manufacturing equipment from agricultural machinery to mobile construction equipment. PH's motion-control revenue is supplemented with revenue from its aerospace and climate control segments. Acquisitions completed over the previous 12 months have been a key component of PH's growth contributing approximately 45% of its net sales growth for the first quarter of fiscal 2009 ended September 30. Net sales increased nearly 10% to $3 billion for its first fiscal quarter of 2009 over the same period a year ago. PH is continuing to focus on solidifying its financial position while keeping the option of additional acquisitions on the table.
Final Thoughts
Orders for big ticket industrial equipment maybe slowing with a slump in liquidity and confidence in the marketplace, but the need to improve energy distribution and upgrade mechanical equipment has long-term appeal for investors focused beyond 2009.
In this article we'll review the key players in the industry to find those that have positioned themselves for a brighter future beyond 2009.
ABB Limited (NYSE:ABB)
Generating power is one thing, but when agricultural producers in the Netherlands and the U.K. wanted to ensure that electricity for two super-sized greenhouses in their respective countries would be managed efficiently they each turned to ABB medium voltage products. ABB's UniGear power supply will provide power to the greenhouses and supply electrical power that can be resold to local power grids. ABB's products support infrastructure development in the areas of renewable energy, power management equipment, robotics used by automotive manufactures and other automation products. Given the headwinds in the global economy, ABB reported a 29% decline in large orders above $15 million for the third quarter ending September 30 in comparison to the same time period a year ago. The decline in large orders was partially offset by a 14% increase in small orders below $15 million led by orders from the U.S. and Asia. Despite the shift from large to small orders, ABB's revenue increased 22% over the third quarter a year ago to $8.8 billion. ABB's future success will be determined by the priority given by developed nations to upgrade and also by developing nations desire to expand their power transmission systems beyond 2009.
Eaton is a supplier of electrical systems used around the world and also fluid power systems used by the aerospace aircraft industry and automotive transmissions and fuel management systems used by the trucking and auto industries. Eaton reported record third-quarter revenue of $4.1 billion representing a 25% increase over the prior year driven primarily by acquisitions. Eaton completed 11 acquisitions last year focused on boosting its Electrical and Fluid Systems business segments. Fourth-quarter results are not expected to be as strong given the slowdown in the global economy, but Eaton's commitment to focusing on high growth Electrical and Fluid power industries may pay dividends in the years following 2009. (For more on this method of corporate growth, be sure to check out our Mergers And Acquisitions Tutorial.)
Parker-Hannifin (NYSE:PH)
Parker-Hannifin is more of a pure play on motion-control and fluid systems used in all types of industrial and manufacturing equipment from agricultural machinery to mobile construction equipment. PH's motion-control revenue is supplemented with revenue from its aerospace and climate control segments. Acquisitions completed over the previous 12 months have been a key component of PH's growth contributing approximately 45% of its net sales growth for the first quarter of fiscal 2009 ended September 30. Net sales increased nearly 10% to $3 billion for its first fiscal quarter of 2009 over the same period a year ago. PH is continuing to focus on solidifying its financial position while keeping the option of additional acquisitions on the table.
Final Thoughts
Orders for big ticket industrial equipment maybe slowing with a slump in liquidity and confidence in the marketplace, but the need to improve energy distribution and upgrade mechanical equipment has long-term appeal for investors focused beyond 2009.
by
Gregory S. Davis
Gregory is a freelance writer for Investopedia.com. He has a consulting background in the banking, telecommunications and healthcare fields. Gregory is a graduate of the Wharton School of Business. Click here to visit his website.
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